2014 Tax Law Changes

We keep track of all the tax law changes so you don't have to. TaxACT 2014 federal and state products have all the latest tax law changes to help you get your maximum guaranteed refund the fastest way possible!

Employees

The maximum amount of your earned income on which you pay Social Security tax is now $117,000. When you reach that amount with one employer, they should stop withholding Social Security tax from your pay until the following year. If you work for more than one employer, and your total earnings are more than $117,000, TaxACT calculates a credit for any overpayment of Social Security taxes.

If you qualify, you can exclude up to $99,200 of your foreign earned income from your taxable income for 2014. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $99,200.

Families

You may qualify for a credit equal to up to $13,190 of your adoption expenses. If your employer provides adoption benefits, you may also be able to exclude up to the same amount from your income. Both a credit and exclusion may be claimed for the same adoption, but not for the same expense. The credit is now permanent and indexed to inflation.

Homeowners

The canceled debit exclusion provides tax relief on canceled debt for many homeowners involved in the mortgage foreclosure crisis. You may exclude up to $2,000,000 ($1,000,000 if married filing separately) of canceled qualified principal residence indebtness from taxable income.

You may be able to deduct qualified mortgage insurance premiums, also known as private mortgage insurance (PMI), you paid on a home as an itemized deduction. This amount may be reported in Box 4 of Form 1098.

If you have no children, your maximum Earned Income Credit for 2014 is $496. With two children, the maximum amount is $5,460, and with one child, it is $3,305. If you have three or more qualifying children, the maximum Credit you can receive for 2014 is $6,143 (up from $6,044 in 2013).

Education & College

You may be able to exclude all or part of the interest from qualifying Series EE or Series I bonds if you use the income for qualified educational expenses. You cannot take this benefit if your modified adjusted gross income is $89,700 or more ($142,050 if you file jointly, or if you file as Qualifying Widow(er) with Dependent Child).

The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. In addition, you can even get a refund if you don't owe any tax for up to 40% of the credit ($1,000).

You can still deduct tuition expenses as an adjustment to income, even if you don't itemize your deductions. You generally take the tuition expense deduction if you don't qualify for an education credit or other tax break for the same expenses.

Health care

Changes for 2014 include the addition of the Health Insurance Premium Tax Credit (see below) and the Individual Shared Responsibility Provision. The majority of taxpayers will see minimal impact on their 2014 federal taxes. For more information, visit TaxACT's website, HealthcareACT.com. The site offers tools and information to help you understand the impact of the Affordable Care Act on your taxes. Resources include year-by-year guidance and calculators to estimate your eligibility for the premium tax credit or your tax penalty for being uninsured.

If individuals or families purchase health insurance through the Health Insurance Marketplace, they may qualify for the new Health Insurance Premium Tax Credit. To qualify for the credit, your household income must fall between 100 percent and 400 percent of the federal poverty line, you may not be claimed as a dependent on any other taxpayer's return, and (if married), you must file jointly. In the case of spousal abuse or abandonment, this requirement may be waived.

In 2014, each individual taxpayer must carry the required "minimum essential coverage" each month, qualify for an exemption, or pay mandatory taxes. For those facing this new penalty, relief provisions have been written into the tax laws to help taxpayers transition into these new requirements. The minimum amount of insurance coverage you must carry is calculated per family member and then added together.

High-income households

If you have a high adjusted gross income, you may not be able to take all your itemized deductions, thanks to the Pease provision. Itemized deductions start to phase out at $152,525 if you are married filing separately ($254,200 for individuals, $279,650 if head of household, or $305,050 if filing jointly). Your itemized deductions are reduced by 3% of your adjusted gross income over these amounts, but they are never reduced by more than 80% of your otherwise allowable deductions.

Your personal exemptions for yourself, your spouse, and your dependents reduce your taxable income by $3,950 each. If your adjusted gross income is over $254,200 ($152,525 if married filing separately, $305,050 if filing jointly, or $279,650 if filing as head of household), your personal exemptions are reduced by 2% for each $2,500 or portion over these amounts. The exemption phases out completely at $376,700 ($427,550 if filing jointly, $213,775 if filing separately, $402,150 if filing as head of household).

Miscellaneous

The standard mileage rate for the use of your car or other vehicle dropped half a cent to 56 cents per mile for business and 23.5 cents per mile driven for medical or moving purposes. The rate for charitable travel remained the same at 14 cents per mile.

The most you can contribute to one of these plans remains at $2,500. Your spouse can also contribute $2,500 if he or she meets the qualifications. For certain FSAs, up to $500 can now be carried over to the next year.

(1) Self-only coverage. For taxable years beginning in 2014, the term "high deductible health plan" as defined in Sec. 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,200 and not more than $3,250, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,350.

(2) Family coverage. For taxable years beginning in 2014, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,350 and not more than $6,550, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,000.

Upcoming Tax Dates

August 10 — Employees who work for tipsIf you received $20 or more in tips during July, report them to your employer - Details

August 10 — Social security, Medicare, and withheld income taxFile Form 941 for the second quarter of 2015. This due date applies only if you deposited the tax for the quarter timely, properly, and in full.

August 12 — Communications and air transportation taxes under the alternative method. Deposit the tax included in amounts billed or tickets sold during the first 15 days of July.

August 14 — Regular method taxesDeposit the tax for the last 16 days of July.

August 17 — Social security, Medicare, and withheld income taxIf the monthly deposit rule applies, deposit the tax for payments in July.